LECTURE SIX

THE DERIVATIVES OF FUNCTIONS

Lecture outline

6.1 Introduction
6.2 Objectives
6.3 The Derivatives of a Functions
6.4 Differentiability and Continuity
6.5 The Rules of Differentiation
6.6 The Rate of Change
6.7 The Theory of the Firm

6.1 Introduction
In this lecture we are going to see the importance of derivatives. We
start by defining the derivative and developing some rules for finding
the derivative of a function. We then continue by showing how to use
the derivative to find the rate of change of a function and finally
demonstrate other useful applications of derivatives.

6.2 Objectives
At the end of this lecture you should be able to:
1. Define the derivative of a function
2. Use the three-step rule to find the derivative of a
function; if it exists
3. Define continuity of a function and give the
relationship between differentiability and continuity
of a function
4. State the rules of differentiation and apply them to
determine the derivative of a function
5. Determine the rate of change of a function with
respect to the independent variable
6. Find the maximum and minimum point of the
function in the domain of the independent variable
6.3 The Derivative of a Function

2
Let us consider the function f ( x )=x and the point (1, 1) on the graph of the function.
Let us draw the line that just touches the graph at point (1, 1). See figure 6.1.

10
9
8 f ( x )=x 2
7
6
5
y

4
3
2
1 (1,1)
0
-1 0 1 2 3
x

Fig 6.1

This line is called the line tangent to f at (1, 1). If we knew the slope of this tangent we
would write its equation. To find the slope of this tangent we proceed as follows: We add
2
a number h to 1, thus the point (1+h , f (1+h))=(1+h , (1+h) ) will lie on the graph of
f . We then draw a line through the points (1, 1) and (1+h , (1+h )2 ) . This line is called
the secant line. See fig. 6.2.
 secant line
(1+h, (1+h)2

tangent line
(1, 1)

1 1+h

Fig. 6.2
( 1+h )2 −12 1+ 2h+ h2 −1 h ( 2+ h)
slope= = = =2+ h
The secant line has slope 1+ h−1 h h
We now let h approach 0. As h gets smaller and smaller 1+h approaches 1 on the x-
2
axis and point (1+h , (1+h ) ) “slides” along the graph towards point (1, 1) and the secant
approaches the tangent line at (1, 1). Since the secant line approaches the tangent line, it
follows that the slope of the secant line must approach the slope of the tangent line. The
point (1, 1) can be replaced by a general point ( x , f ( x )) . This leads to the following
general definition of derivative of a function.

Definition
Let f be a function. The derivative of f at x, denoted by f or f ( x ) , is defined to be
' '

f ( x+ h)−f ( x )
f ' ( x )=Lim
h →0 h
provided this limit exists. The notation f ( x ) is read “ f prime x.”
'

Example 6.1

2
Fine the derivative of f ( x )=x

f ( x+ h)−f ( x )
f ' ( x )=Lim
Solution; We form the quotient h →0 h which is called the
difference quotient of f at x. We therefore have
f ( x+ h)−f ( x )
f ' ( x )=Lim
h →0 h
 ( x+ h)2 −x 2
Lim
= h→0 h
x2 +2 xh+ h2 −x 2
=Lim
h→0 h
2
2 xh+ h
=Lim =Lim 2 x + h=2 x
h→0 h h→0

2
Notice that the derivative of the function f defined by f ( x )=x is another function f
'

defined by f ( x )=2 x . If we let x=a in the equation f ( x )=2 x , we obtain the slope of
'

the line tangent to f at the point (a , f (a )) .For instance, if we take x=1 , then
f ( 1 )=2( 1 )=2 , so the slope of the line tangent to f at (1 , f (1))=(1, 1) is equal to 2.
'

The process we have used to find the derivative is known as the Three-step Rule.

The Three-Step Rule

To find the derivative f ( x ) of f ( x ) ;
'

f ( x +h )−f ( x )
1. Form the difference quotient h .
2. Simplify the difference quotient to eliminate the factor h from the denominator.
f ( x +h )−f ( x )
f ( x )=Lim
3. Then h→0 h
if this limit exists.

6.4 Differentiability and Continuity

If a function f has a derivative f ( a) at x = a, we say that the function is differentiable

'

at a. If a function f does not have a derivative at x = a, we say it is not differentiable at a.

Example 6.2
The function f defined by f ( x )=√ x is differentiable at a if a> 0 , but it is not
differentiable at 0. To see this, suppose a≥0 and note that

Lim
√ a+h− √a =Lim ( √ a+h−√ a ) ( √ a+h+ √ a)
h→0 h h→ 0 h ( √ a+h+ √ a)
a+h−a
=Lim
h→0 h( √ a+h+ √ a)
1
=Lim
h→0 √ a+h+ √ a
If a> 0 , this limit is equal to
1 1
=
√ a+0+ √ a 2 √ a ,
which does not exist, and therefore f is not differentiable at 0.
' 1
f ( x )=
Thus 2 √ a exists if a> 0 . However, if a=0 , the limit becomes
1 1
Lim =Lim
h→0 √ 0+ h+ √ 0 h →0 h

If the derivative f ( a) exists, it is the slope of the unique nonvertical line tangent to f at
'

(a , f (a )) . Therefore if f does not have a unique tangent line at (a , f (a )) , as in figure

'
6.3 and 6.4, or if the tangent line is vertical, as in figure 6.5, then the derivative f ( a)
cannot exist.

(a, f (a))
f (x)

Fig. 6.3
 y f (x)
(a, f (a))

Fig. 6.4

(a, f (a))
f (x)
x
Fig. 6.5

Closely allied to the notion of differentiability is the notion of continuity. A function f is

continuous at x = a if we can trace its graph through the point (a , f (a ) ) without lifting
our pencil from the paper. This means that f is continuous at x=a if there is neither a
jump nor a gap in its graph at x=a . If f is not continuous at x=a we say it is
discontinuous at x=a .
We can state the definition of continuity of a function at x=a in terms of limits

The First Definition of Continuity

Lim f ( x )=f ( a)
A function f is continuous at x=a if f ( a ) exists and x →a
This definition of continuity agrees with our previous geometric one: if f ( a ) exists, then
the point (a , f (a ) ) is on the graph, so there can be no gap in the graph of f at x=a ,
then there can be no jump in the graph at x=a . Why is this so?
Note that if we set x=a +h , them we may write
Lim f ( x ) Lim f ( a+h )
x →a as h→0
Hence we may rewrite the first limit definition of continuity as

The Second Limit Definition of Continuity

A function f is continuous at x=a if f ( a ) exists and
Lim f ( a+h )=f ( a )
h→0

Example 6.3

Let P be the postal function defined by

p( x )=Cost of mailing a letter that weighs x grams .
Currently postage is sh. 2.5 for a letter weighing 1 gram or less, and an additional sh. 2
for each additional gram or part of a gram. Therefore

{
sh. 2. 5 0<x ≤1
p( x )= sh. 4 .5 1<x≤2
sh. 6 . 5 2<x ≤3

Note that p is discontinuous at x=1, 2 , 3 and continuous in the intervals (0, 1), (1, 2),
(2, 3).

The relationship between continuity and differentiability is this: a function differentiable

at x=a is continuous at x=a . To see this, suppose the function f has a derivative at
x=a . It f were not continuous x=a , it would have either a jump or gap in its graph at
x=a . But if this were the case, it could not have a unique tangent line at (a , f (a )) , and
hence it could not have a derivative at x=a . Thus f must be continuous at x=a .

Thus if a function is differentiable at x = a, then it is continuous at x = a.

Activity 6.1

Find the derivative of the following functions

x
f ( x )=
1. f ( x )=√ x+1 2. x−1 3. f ( x )=2 x 3 + x 2
 Find the intervals on which the function is continuous and the values of x
for which it is defined but discontinuous.

x 2 x −4
2 f ( x )= f ( x )=
4. f ( x )=x −3 x+2 5. x−2 8. x2 +1

10.
f (x)=¿¿ f ( x)=¿¿ 11.
12. If the price of a gallon of petrol is p shillings, petrol consumption

will be y billion gallons per yea, where

y= {500−10 p 0≤ p≤1 .50
560−50 p p>1 .50
Where is the function
a. continuous?
b. discontinuous?
c. not differentiable?

13. the number of bacteria present t hours after the start of a

{
2
y= 2 t +100 0≤t <2
experiment is y thousand, where 160−26 t 2≤t≤6
Where is the function
a. continuous?
b. discontinuous?
c. not differentiable?

6.5 Rules of Differentiation

The process of finding the derivative of a function is called differentiation. As of now,

we can only differentiate functions by means of the Three-Step Rule. The process is often
time consuming and tedious to apply. Fortunately, it is possible to use the Three-Step
Rule to prove some very general rules of differentiation. Once we have these rules of
differentiation available and understand how to use them, we will be able to differentiate
entire classes of functions. We are now provide some important rules of differentiation
and illustrate their use.
Let c be any number and consider the constant function f defined by
f ( x )=c for all numbers x .
By the Three-Step Rule,
f ( x+ h)−f ( x ) c−c
f ' ( x )=Lim =Lim =Lim 0=0
h →0 h h→0 h h→0
We have proved the constant rule.
The Constant Rule
If c is a number and f ( x )=c for all x , then
'
f ( x )=0
That is, the derivative of a constant function is zero.

1. The Constant Rule

If c is a number and f ( x )=c for all x, then f ( x )=0
'

That is the derivative of a constant function is zero.

Let n be any positive integer and consider the power function defined by
f ( x )=x n for all numbers x.
We have
' ( x +h )n −x n
f ( x )=Lim
h →0 h
By the Polynomial Theorem,
n (n−1 n−2 2
( x+ h) n=x n +nx n−1 h+ ) x h +. ..+h n
2 ,
2
where all the terms after the first two on the right side of the equality have h as a factor.
Therefore if we factor h out of all the terms after the first one, we will obtain
n(n−1) n−2
( x+ h) n=x n +h(nx n−1 + x h+.. .+h n−1 ),
2
where now all terms inside the brackets after the first one all have h as a factor, and hence
will approach 0 as h→ 0 . Thus
' x n + h(nx n−1 + ( n(n−1)/2 ) x n−2 h2 +. ..+h n )−x n
f ( x )=Lim
h →0 h
n(n−1) n−2
Lim (nx n−1 + x h+.. .+h n−1
= h→0 2
=nx n−1 +0+0+. ..+0
¿ nx n−1
n ' n−1
We have shown that if f ( x )=x , then f ( x )=nx . This fact, which is known as the
power rule, remains true if we replace n by any none zero number.

2. The Power Rule

r
If r is any number except 0 and f ( x )=x , then
f ' ( x )=rx r−1
That is the derivative of x raised to a nonzero power is the power times x raised to the
power minus 1.

Example 6.4
 1
2
Given f ( x )= x its derivative is
1 −1 −1
' 1 2 1 2
f ( x )= x = x
2 2

3. The Constant-multiple Rule

If c is a number and g is a function such that f ( x )=cg ( x ) and g ( x ) exists then
'

' '
f ( x )=c g ( x )

Example6.5

2
If f ( x )=3 x then
' ' '
f ( x )=(3 x 2 ) =3( x 2 ) =3 . 2 x 2−1=6 x

4. The Sum Rule

If f ( x ) and g ( x ) both exist and h( x )=f (x )±g( x ) , then h ( x )=f ( x )±g ( x )

' ' ' ' '

2 2 ' 2 ' 2−1 ' '

If h( x )=−2 x +3 then h ( x )=(−2 x +3 ) =(−2 x ) +(3 ) =−2 .×2 x +0=−4 x

Activity 6.2
'
Find f ( x ) for
1 1
f ( x )= 3 1 4 f ( x )=
1. x 2. f ( x )= x 5
3. f ( x )=3 x 3
4. √x
2
1/3 −4 /3 f ( x )=8 x 1/ 4
+9 √ x−
5. f ( x )=4 x +7 x +1 6. x 1/3

5. The Product Rule

If h=fg and f ( x ) and g ( x ) both exist, then
' '

' ' '

h ( x )=f ( x ) g ( x )+ g( x )f ( x )

Example 6.6

If h( x )=(6 x +7 )(3 x −2) then by the product rule

' ' '
h ( x )=(6 x +7 )( 3 x−2 ) +(3 x−2)(6 x +7 )
= (6 x +7 )3+(3 x −2)6
= 18 x+ 21+ 18 x −12
= 36 x +9
6. The Quotient Rule
f
h=
If g , f ' ( x ) and g' ( x ) both exist and g' ( x )≠0 then
' '
' g( x ) f ( x )−f (x )g ( x )
h ( x )=
( g( x ))2

Example 6.7
2 x+3
h( x )=
If 5 x +4 then by the quotient rule
' '
' (5 x +4 )( 2 x +3) −2 x +3 )(5 x +4 )
h ( x )=
(5 x + 4 )2
(5 x+4 )2−(2 x +3)5
= (5 x+4 )2
10 x+ 8−10 x−15 −7
2
= 2
= 25 x + 40 x +16 25 x + 40 x +16

7. The Chain Rule

If h( x )=f (g ( x )) and f ( g ( x )) and g ( x ) both exist then

' '

' ' '

h ( x )=f ( g( x ))g ( x )

Example6.8

20
Suppose h( x )=(2 x+3)
h( x ) can be written as a composite function by choosing f to be the “outside
function” and g the “inside function”;
h( x )=f (g ( x )) where f ( x )=x 20 and g( x )=2 x +3 then h( x )=f (g ( x )) , and since
f ' ( x )=20 x 19 and g' ( x )=2 the chain rule tells us that
' ' '
h ( x )=f ( g( x ))g ( x )
' '
= f ( g ( x ))g ( x )
19
= 20(2 x +3) 2
19
= 40 (2 x +3 )

8. The General Power Rule

r
If h( x )=[ g( x )] r≠0 then
h' ( x )=r[ g (x )]r−1 g' ( x )

Example 6.9
 h( x )=( x 3 −2 x 2 +17)12 then
h' ( x )=12(x 3 −2 x 2 +17 )11( x 3 −2 x 2 +17 {)' ¿
3 2 11 2
= 12( x −2 x +17 ) (3 x −4 x )

9. The Chain rule: Second Formulation

This is another formulation of the chain rule that is useful.

The chain rule; second formulation
dy dx
If y = f(x) and x=g(t) and dx and dy both exist then
dy dy dx
= .
dt dx dt

Example6.10
Suppose y=x2+1 and x=3t-2, then by the second formulation and the
chain rule

dy dy dx d ( x2 +1 ) d (( 3 t−2 )
= .
dt dx dt = dx dt
= 2x.3=6x
dy
If we wish to write dx as a function of t we substitute 3t-2 for x
dy
Thus dx = 6(3t-2)=18t-12
Example6.11
du du dv
= .
Let u=3v2-2v+2 and v=2√ w , then dw dv dw
d
( 3 v 2−2 v+2 ) d ( 2 √ w )
= dv dw
−1
2
= (6v-2) w
 6 v−2
= √w
You should realize that the chain rule is a statement about rates of
change: it says that if y depends on x and x depends on t, then the
rate of change of y with respect to t is a product of the rate of change
of y with x and the rate of change of x with respect to t.

Activity 6.3
'
Use the rules of differentiation to find f ( x )

4
1. f ( x )=3 2. f ( x )=4 x 3. 6 x 4. f ( x )=12 x 5.
3

f ( x )=2 x+3 x 1/2

1+ x
f ( x )=7 x 2/ 3 + −1 2 3
6. x 2 7. ( x+1)( x−3 ) 8. (2 x +3 x )
2
9. given that y=x + 1 and x=2+3 t . Find dy/dt

6.6 The Rate of Change

The derivative of a function describes the rate of change of the
function with respect to its dependent variable.

The derivation as rate of change

For any function the derivation f’ gives the instantaneous rate of
change of t with respect to its independent variable.

Example6.12
A stone dropped from a height falls
s(t)=16t2
feet in t seconds. The velocity of the stone at t is thus
v(t)=s’(t)=32t feel per second.
For instance, the velocity of the stone exactly 2 seconds after it is
dropped is
 V(2)=64 feet per second.
The derivative of v(t) will give the stone’s rate of change of velocity
with respect to time; this is known as acceleration. If we let a(t)
denote the stone’s acceleration at time t, then
a(t) =v’(t)=32
feet per second. Note that the acceleration of the stone is constant.

Acceleration
If v(t) is the velocity of an object at time t and a(t) its acceleration at
time t, then
a(t) = v’(t)
Example6.13
Akamo company has studied the productivity of its employees and has
found that after t years of experience of employee’s monthly
productivity can be expressed to be f(t)=-2t2+120t+100 units.
The derivative f’(t)=-4t+120
gives the rate of change of monthly productivity with respect to years
of experience. For instance, when t=10 we have f’(10)=80. Thus
employees with 10 years of experience are increasing their monthly
productivity rate of 80 units per year. Similarly, since f’(20) = 40,
employees with exactly 20 years of experience are also increasing
their monthly productivity, but only at a rate of 40 units per year.
Note that f’(30)=0, hence employees with exactly 30 years of
experience will be neither increasing nor decreasing their productivity.
Since
f’(t)=-4t+120
is negative for t>30, employees productivity decreases when t>30. It
follows that the greatest productivity is reached when t=30, hence the
maximum monthly productivity is f(30)=1900.
 f(t)=-2t2+120t+100
2000

1500

1000

500

0
0 20 40 60 80
t

Fig 6.6 graph of the productivity function

Activity 6.4

1. A particle moves in a straight line in such a manner

that after t seconds after its start it has traveled
5
2
s(t)=0.2t meters.
a) Find the distance it has traveled 1, 4, and 9
seconds after its start.
b) Find the velocity 4 and 9 seconds of its start.
c) Find the acceleration 4 and 9 seconds after its
start.
2. A firm cost function is given by C(x)=0.025x 2+2500.
Find the rate at which its cost is changing when
production is 10 units, 100 units, 1000 units.
3. If the supply function for a product is given by
q=p2+2p, where q is in thousands of units. Find the
rate at which the quantity of the product supplied to
the market is changing when the price is kshs.5 per
unit, kshs.100 per unit.
4. The number of bacteria present in a culture t hours
 after the start of an experiment is given by
f(t)=t3+6t2+100. Find the rate at which the size of the
bacteria population in the culture is changing when
t=2, t=3, and t=10.
5. Students who take an intensive foreign language
course in which only the language being taught is
spoken to them typically understand.
P=0.005t2-0.05t2+2t
percent of what is being said to them by the end of the
day t of the course, 0≤t≤25. Find the rate at which the
comprehension of a typical student is changing 5 days, 10
days and 15 days into the course.

6.7The theory of the firm

The theory of the firm is concerned with questions such as:
 How many units of the product must a firm make and sale in order
to maximize its profit.
 What price should the firm charge for its products in order to attain
its maximum profit?
 How will changing the products price affect the firm’s revenue.

6.7.1 Marginality
If a firm produces and sells x units of its product, then, it has a cost
function C, a revenue function R, and a profit function P .
P=R-C
It is important to note that these functions need not be linear, but as in
the linear case we can find the firm’s break-even qualities by setting
R(x)=C(x) and solving for x, or alternating setting P(x)=0 and solving
for x.
Example6.14
Suppose ABZ company’s cost and revenue functions are given by
C(x)=x2+500,000 and R(x)=1500x;
Then ABZ’s profit function is given by;
P(x) = R(x) - C(x) = -x2+1500x – 500,000
Since
P(x) = -(x-500) (x-1000)
setting P(x) = 0 and solving for x yields x = 500 and x = 1000 .
therefore the break-even quantities are 500 units and 1000 units.
The figure below shows the graphs C(x) and R(x) and P(x).
Note that ABZ will make a profit of it makes and sells between 500 to
1000 units, but will suffer a loss if it makes and sells fewer than 500 or
more than 1000 units.
figures 6.7, 6.8 and 6.9 show the graphs of C, R and P.

C(x) = x2+5000 loss

Shs. R(x)=1500x

gain
500,000

x
loss 500 1000

Fig. 6.7
The derivative of the cost, revenue, and profit functions are called
marginal functions. Thus C’ is the marginal cost function, R’ the
marginal revenue function and P’ the marginal profit function.
The economic interpretation of the marginal cost function is as follows:
since C’(a) is the instantaneous rate of change of the cost when x=a,
C’(a) represents the approximate additional cost of producing one
more unit. In other words, C’(a) is the approximate additional cost of
producing the (a+1)st unit. Similarly, R’(a) is the approximate
additional revenue obtained by selling the (a+1) st unit and P’(a) is the
approximate additional contribution to profit made by the (a+1) st
unit.

Example6.15
Let ABZ’s cost of revenue and profit functions remain the same. Then
ABZ’s marginal cost, revenue and profit functions are given by:
C’(x) = 2x, R’(x) = 1500, P’(x) = -2x+1500 respectively. Since C’(600)
= 2(600) = 1200, it will cost ABZ approximately kshs1200 to make the
601 st unit. Similarly, since R’(600)=1500. ABZ’s revenue from selling
the 601 st unit will be approximately shs.1500.
Also, P’(600) = 300 shs., the approximate additional contribution to
profit made by selling the 601 st unit.

100000

0
0 500 1000 1500
-100000

-200000
shs.

-300000

-400000

-500000

-600000
x

Fig. 6.8
 (a, P(a))

sh
s.
x

-
P(x)

Fig. 6.9
Figure 6.9 shows the graph of a typical profit function P. Notice that
the maximum profit occurs when x = a units are made and sold. Since
the tangent line to P at (a, P(a)) is horizontal, its slope will be zero;
hence we must have P’(a)=0. Since P(x) = R(x) – C(x),
0 = P’(a) = R’(a) – C’(a),
and thus R’(a) = C’(a).
Therefore profitis maximized at the value of x for which R’(x) = C’(x) at
the quantity where marginal revenue equals marginal cost.
Profit Maximization
Profit is maximized at the quantity for which marginal revenue equals
marginal cost.

Example6.16
Consider ABZ company example, if we set marginal revenue equal to
marginal cost and solve for x, we have;
R’(x) = C’(x)
1500 = 2x
750 = x
 Therefore ABZ’ profit is maximized when it makes and sells 750
units, and its maximum profit is P(750) = shs.62,500. This is
shown in figure 6.10.

100000 (750, 62500)

0
0 500 1000 1500
-100000

-200000
shs.

-300000 750

-400000

-500000

-600000
x

Fig. 6.10

Let us suppose that a firm has not yet determined what price it should
charge for its product. The price that must be charged in order to
obtain a given revenue depends on the quantity of the produce
demanded. If the quantity demanded is large, the firm can sell many
units at a low price. If the quantity demanded is small, it cannot sell
many units, and therefore must charge a higher price per unit in order
to obtain the same revenue. If we let p denote the price of the product
and x the quantity demanded, then p depends on x by means of a
demand function p = d(x). Since revenue is a quantity sold times unit
price,it follows that the firm’s revenue is given by:
R(x) = xp = xd(x)

Example6.17
Suppose ABZ company’s cost function is given by C(x) = x 2+500 000.
Let us suppose the company has not yet established a price for its
product. Let the demand function for the product be defined by
p=2100-0.5x
Then ABZ’’s revenue function is given by
R(x) = xp = x(2100-0.5x) = 2100x-0.5x 2
As before we maximize profit by setting R’(x) = C’(x) and solving for x:
we have
R’(x) = C’(x)
2100-x = 2x
700 = x
Therefore ABZ will maximize its profit by making 700 units. In order to
sell 700 units, the firm must charge;
p = 2100 – 0.5(700) = 1750 shs. per unit.
We have thus determined that if ABZ prices its product at 1750shs. per
unit, it will sell 700 units for a maximum profit of P(700) = 235,000shs.
Compare example 6 with example 17. in example 16 we assumed that
ABZ had set a price of 1500shs. per unit and found that under this
condition the firm should make and sell 750 units for a maximum profit
of 62,500shs. in example 16 it turned out that if ABZ’s demand
function is defined by p = 2100 – 0.5x, then the firm should make
fewer units, sell them at a higher price, and make a larger profit. A
different choice of demand function could have led to the opposite
conclusion: that ABZ would be better off selling more units at a lower
price. The property of the demand function that leads to such results is
called elasticity of demand.

6.7.2 Elasticity of Demand

A demand function for a product relates quantity demanded q to unit
price p. Here we consider price p to be the independent variable so
that the demand function is defined by an equation of the form q =
d(p). Figure 6.11 shows the graph of a typical demand function. Note
that as price p increases, quantity demanded q decreases.
 q

q = d(p)

Fig. 6.11
The quantity q’ = d’(p) gives the rate of change of the quantity
demanded with respect to price. Since the line tangent to the demand
curve at any point will have a negative slope, d’(p) will always be
'
negative. If |d ( p)| is large, then the quantity demanded is decreasing
'
quite rapidly as price increases; if |d ( p)| is small, the quantity
demanded is decreasing quite slowly as price increases. In other
'
words, if |d ( p)| is large, a small change in price results in a large
'
change in quantity demanded; if |d ( p)| is small, a small change in price
results in a small change in quantity demanded.

Example 6.18
Suppose
10 , 000
d ( p )=
p
Then
' 10 , 000
d ( p)=−
p2 ,
so d’(2) = -2500 and d’(100) = -1. Thus when the price is 2shs., a small
increase in price will cause a large decrease in quantity demanded.
When the price is 100shs. a small increase in price leads to a small
decrease in the quantity demanded.
When a small change in price results in a large change in quantity
demanded, we say that demand is elastic. When a small change in
price results in a small change in quantity demanded, we say that
demand is inelastic. To make this notion clear we give the following
definition:
The Elasticity of Demand Formula
If the demand function for a commodity is defined by an equation of
the form
q = d(p), the commodity’s elasticity of demand at price p is E(p),
where
p [ d ' ( p )]
E( p )=
d( p)
Example 6.19
If the demand function for a product is defined by
q = -1000p + 10,000
then the elasticity of demand for the product is
p [ d ' ( p )] −1000 p
E( p )= =
d( p) −1000 p+10 , 000
Suppose that p = 2shs. Then

|E( p)|=|E(2)|=|−0.25|=.25<1 ,
so demand for the product is inelastic at a price of 2shs. note that
when p = 2shs., the quantity demanded q = 8000 units and revenue is
thus 2(8000) = 16000shs.
Suppose that p = 8shs. then

|E( p)|=|E(8)|=|−4|=4>1 ,
so demand for the product is elastic at price 8shs., the quantity
demanded
q = 2000 units and revenue is 8(2000)shs. = 16,000shs.
When |E( p)|=1 , demand is said to be of unit elasticity.
The general truths:
Elasticity and Revenue
If demand is inelastic at a price,
 Increasing a price by a small amount will result in a increase in
revenue;
 Decreasing the price by a small amount will result in a decrease
in revenue;
If demand is elastic at a price,
 Increasing the price by a small amount will result in a
decrease in revenue;
 Decreasing the price by a small amount will result in an
increase in revenue.
If demand is of unit elasticity at a price, increasing or decreasing the
price by a small amount will leave revenue approximately constant.

Activity 6.5

1. ATA company cost and revenue functions are given by

C(x) = 5x2+500 000 and R(x) = -x3-25x2+14,400x
respectively.
Find
a) ATA’s cost of making 25 units
b) ATA’s approximate additional cost of making the
twenty-sixth unit.
c) ATA’s revenue if it sells 50 units
d) The approximate additional revenue from selling the
fifty-first unit.
e) ATA’s profit for making one selling 75 units.
f) ATA’s approximate additional profit from making
and selling the seventy-sixth unit.
 g) ATA’s maximum profit and the number of units it
must make and sell in order to attain its maximum
profit.
2. The demand function for a product is given by q = -3000p + 120,000.
a)
(i) find the elasticity of demand for the product when p = 15shs.
(ii) find the quantity demanded and revenue when p = 15shs., p =
13.50shs, and
p = 16.50 shs.
b)
(i) find the elasticity of demand for the product when p = 20shs.
(ii) find the quantity demanded and revenue when p = 20shs., 19shs and
21shs.

6.8 Summary

In this lecture we have learned on how to find the derivative of a

function using the Three-step Rule. We used this rule to prove some
general rules of differentiation such as the constant rule, the quotient
rule, the product rule etc. We also introduced ourselves to the notion
continuity of a function at a point and the relationship between
differentiability continuity of a function. We studied about to the rate
of change and applied to speed to determine velocity and
acceleration. Finally we applied rate of change in the theory of the
firm to find the marginal cost, marginal revenue, marginal profit and
elasticity of demand.

6.9 References
BRIEF CALCULUS for Management and the Life and Social
Sciences
Second Edition
Donald L. Stancl and Mildred L. Stancl